Friday, August 26, 2005

Europe accused…

Interestingly, Ambrose Evans-Pritchard, in The Telegraph today picks up a story that has being doing the rounds for a few days, the report that claims that the CAP has a much bigger effect in distorting global farm trade and damaging poor countries than American farm subsidies.

This is the result of a study by the US Congress, which states that Europe accounted for almost 90 percent of world export subsidies, the worst abuse that leads to the dumping of surplus produce in the developing world. By contrast, the US makes up just 2 percent of the total.

The study was carried out by the non-partisan Congressional Budget Office, known for academic neutrality. It said the EU imposed "extreme tariffs" of over 100 percent on 39 percent of its entire farm production, compared with 26 percent by the US.

The CBO's director, Douglas Holtz-Eakin, said the usual comparisons showing EU and US farms are roughly equal in volume are highly misleading. "Not all tariffs are created equal; not all subsidies are created equal. For the same dollars, the EU has done much more in the way of distorting subsidies than does the United States."

The EU commission said the study was based on outdated figures that preceded the radical CAP reforms of 2003, aimed at "decoupling" the link between subsidies and production. A spokesman said: "I'm not sure the statistics reflect the current reality. The statistics used do not give full credit to very important, substantial changes in policy in Europe."

In fact, owing to the single farm payments, there will be a reduction in production over term, which will feed through the system, leading to lower levels of subsidised exports from some countries. However, will probably be counter-balanced by the massive gains in productivity from the new enlargement countries, especially Poland which is undergoing the sort of agricultural revolution that the UK and continental countries like France went through in the 50s.

However, the commission could have pointed out that the US government is a major donor of food aid, for which purpose it buys commodities at full market price from its own farmers, thereby affording them a hidden subsidy. The US, therefore, is not as clean as it would like to argue.

Nevertheless, the practice of dumping subsidised food on the world market is a vile practice, totally undermining developing countries whose economies rely on commodity exports. And, far from being repentant, the EU is adding to their burden by imposing unnecessary regulations, often in the name of health and safety, which are just as damaging.

The mainstream media have yet to catch up with this practice but, even on its past and current record, Europe rightly stands accused.